Considerations about memory on electricity tariffs: A case study from Brazil

Abstract

Brazil had experienced a history of very high inflation for many years, having flirted for some time with hyperinflation. By account of this historic, Brazilian society has become accustomed to an indexation that is very present in its the economy. This characteristic makes prices difficult to perceive by society in general. Even considering that nowadays they are under relative control in relation to inflation. Particularly in the electric power industry, a sector with strong regulation in Brazil, tariff fluctuations have been very volatile. Making this scenario even more complex, the sector is subject to a lot of government influence with intense reductions in the cost of electricity followed by severe readjustments. Although residential electricity tariffs were reduced in real terms between 2001 and 2016, a survey conducted with a group of consumers from two of the country's main concessionaires found that consumers perceived that electricity prices had been increasing. The authors identify that the complexity of price formation in the electric power industry and the economic crises experienced in more recent years lead to an erroneous perception about the memory of the prices practiced. Opportunities are identified for utilities and the Energy Regulation Agency to improve their communication process with their customers.